The problem with Neoliberalism

One rarely gets far in a debate about liberal philosophy or policy before somebody decries ‘neoliberalism’. This much-used term acts as a handy catch-all for every aspect of liberalism with which the commentator disagrees. And its use is likely to be met by two responses: large numbers of people will pile in to agree that ‘neoliberalism’ is terrible, while those who defend the idea under discussion will deny that it is ‘neoliberal’. This is because commentators use ‘neoliberalism’ like Justice Potter Stewart uses hardcore pornography: they don’t attempt to define it, but they feel they know it when they see it.

In fact, as Taylor C. Boas and Jordan Gans-Morse show in an academic paper from 2009, over the past 80 years it has lost all connection to its original use and has become a term devoid of meaning, acting instead as an expression of everything that the user dislikes about liberal economic reform.

The term ‘Neoliberalism’ was coined by the Freiberg School in the 1930s to refer to a view of political economy that generally favoured individual liberty, but accepted some role for government intervention in the economy in the pursuit of social ends, such as limited income redistribution and the prevention of monopolies. Also referred to as ‘ordoliberalism’, the Freiberg School presented their views as genuinely “new”, and contrasted their ‘neoliberal’ political economy with laissez-faire classical liberalism. In this they were not unlike the ‘New Liberals’ at the turn of the 20th Century. Later attempts to associate the term with a renaissance in classical liberal thinking are therefore tenuous: Friedrich Hayek was associated with, but not a member of, the Freiberg School; Milton Friedman flirted with the term (in 1951 – pdf) but quickly (1955 – pdf) abandoned it. In fact, ‘neoliberalism’ was the progenitor of Germany’s post-war Social Market Economy; in today’s term, it was more Social Market Foundation than Adam Smith Institute.

The shift in the use of ‘neoliberalism’ appears to have taken place in the 1980s, when opponents of free market reforms in South America began to erroneously associate the term with radical market reformers. Freiberg-inspired neoliberal ideas had been very influential in 1960s, but by the late-1970s pro-market reformers had abandoned the Social Market Economy model and adopted more radical market reforms that sought not only to revolutionise the economy but also to restructure politics and society. A strange inversion resulted where ‘neoliberalism’ became the term critics used for unrestrained capitalism, while unqualified ‘liberalism’ came to refer to more moderate approaches. And as the critics alone used the term, it became one solely of abuse, associated with

the new “market fundamentalism” being implemented in Chile—one which differed from classical liberalism because it dispensed with political liberty, which classical liberalism (as well as the philosophy of Hayek) had always seen as inseparable from economic freedom.

As a result, ‘Neoliberalism

has become a vague term that can mean virtually anything as long as it refers to normatively negative phenomena associated with free markets.

The effect of this is striking. ‘Neoliberalism’ is now solely used by critics of free market policies, ideologies or paradigms; those who promote free markets or classical liberal views almost never use the term. In a review of 148 articles on neoliberalism published in leading journals between 1990 and 2004:

• none of the authors self-identify as a neoliberal;
• just four use the term positively, while nearly half (66 articles) use the term in an explicitly negative way; and
• they hardly ever define the phenomenon they are describing.

This is in stark contrast to other essentially contested concepts in the social sciences. Not only is it common practice to define what you mean when you say liberty, equality or justice; it is essential to promote meaningful debate. Even a critic of socialism should be able to come up with a definition that self-styled socialists would accept. How else could they debate? When somebody says ‘I define liberalism thus’, or ‘I aver that policy to be illiberal’, they are not simply seeking to own liberalism; they are seeking to explore its meaning, and indeed to better understand society as a whole.

‘Neoliberalism’ does not serve that purpose. It exists solely to signal the author’s distaste for some caricature of the free market. It is ‘a conceptual trash heap capable of accommodating multiple distasteful phenomena without much argument as to whether one or the other component really belongs.’ As a result, it acts not to further debate but to shut it down. And that is a problem.

* Tom Papworth is a member of Waltham Forest Liberal Democrats

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59 Comments

  • Little Jackie Paper 24th Jan '17 - 12:59pm

    I’m with you to a point here. ‘Neoliberalism’ really just is a lazy term that gets lobbed around the internet like confetti as a code for, ‘something that I really don’t like.’

    If anything I might even go further than you and say that I don’t event think the term has much to do with what classically was called capitalism.

    However where I depart with you is where you say, ‘…used by critics of free market policies…’ That to me seems to fall in to the laziness trap you yourself decry. As much as anything the contemporary critics of neoliberalism seem to me to have what I would call ‘corporatism’ in mind – that’s very different from, ‘free market policies.’

    If we are going to rightly criticise the empty use of the term neoliberal then I don’t think relating it to over simplistic ‘free market policies’ does much to advance your case.

  • Little Jackie Paper 24th Jan '17 - 1:24pm

    Geoffrey Payne – I don’t really think that looking at what politicians would call themselves really advances anything. I would suggest that Donald Trump seems not to be a Republican in the establishment sense. If Blair’s view of city finance could be termed neoliberal then his increases in public spending were uneasy alongside it.

    I think that the real problem we in the UK are grappling with on a conceptual level is that we don’t really have the old-style class system that conditioned our politics any more – at least not on any level my grandparents would recognise. We don’t really have an adequate vocabulary for what we now see, so lazy words, stripped of any meaning, are common currency.

    In fact if you looking for the really, really over-used, lazy and meaningless term these days I’d say it was ‘working class.’ Or, worse, ‘white working class.’

  • Lorenzo Cherin 24th Jan '17 - 2:00pm

    Tom

    This is a good piece about a much overused and pointlessly criticised word. Those who overuse and criticise it do not even know what it is , and as your history of it reveals to any who would like to see, it renders the use redundant.

    Geoffrey

    Libertarians are on the let as well as right. And please would you and other critics of the Orange Book, stop talking as if it were one thing called Cleggism, it included a number of contributors from across the party , including Vince Cable who is not right wing, and had the encouragement , and forward , of Charles Kennedy, who, unlike the left reaction to it, welcomed debate, because he, unlike some, was a Democrat , in his case even more , in my view, than he was a Liberal, which he was too !

    And since when does the signing up to and taking part in a coalition with another party , make a book written by Liberal Democrats a closed chapter. The policies of the coalition that most of us regret , are not the Liberal Democrat policies, were not , and are and were not in the Orange Book ! Bedroom tax, cuts in certain benefits, tuition fees, they do not appear in that book or it’s successor, Britain After Blair. If the left bothered to read it, and I knew several at the time who condemned it and never read it, like Mary Whitehouse on the media she disliked, they would see some of it was hardly controversial at all, and that which was, only because conservatism, another word misunderstood, is just as readily embraced and present on the left!

    David Laws, before he ever got near government, was vilified because he advocated the consideration of social health insurance, something in the US, considered socialism! He also thought it could be , as with NHS spending now, funded through taxation.He also only considered it because his motive was to bring a new dynamism into the NHS, to keep up with spending and increase provision. He was, as a local mp, horrified , a constituent had been given an outpatient first date to see a specialist , a year ahead !

    This country and this party are conservative in outlook, socialist in affection. Result confusion!

    The French have the best healthcare in the world according to every report bar one or two that measure equity , not speed or quality. People a being led to believe that to back the state in its perfection and in its permanent state of it, is to be a progressive. I see it on the EU too.

    Whatever that obsession is it is not Liberalism !

  • Tom Papworth 24th Jan '17 - 2:00pm

    Geoffrey,

    Thank you for your comment. You are indeed right that terms can change their meaning over time – just look at how ‘liberal’ has completely reversed its meaning in the United States. However, this evolution of terms takes place through the type of debate I described in my penultimate paragraph. Individuals (primarily scholars) need to both propose definitions and emphasise beliefs/values/policies that they do not believe fit – in effect, exploring its ‘intension’ (general meaning) and its ‘extension’ (the cases to which it applies). This requires somebody to actually self-identify as such and to defend that stance. The change in the meaning of ‘neoliberalism’ came after a point where nobody was using the term positively; it has therefore not undergone the type of transition to which you refer, but has become simply a term of abuse and a means of signalling that the author does not like certain market reforms.

    Your attempt to define neoliberalism descends into a list of people who you think are neoliberals – a group, I would add, that most observes would not group together. That’s not a definition. For a definition to have meaning it needs, I think, to be acceptable to both those who agree with it and those who do not (I, for example, could define socialism in a way that socialists would accept even though I am not a socialist). Until we have one, the term is unhelpful and acts not to promote, but to shut down, debate.

  • Richard Easter 24th Jan '17 - 2:01pm

    Most rational people (of all political hues) would believe that some things just shouldn’t be privatised / outosourced / run for profit – e.g. rape crisis centres, the armed forces, police, and essential natural monopoly public services, in the same way nationalisation of resturaunts, football clubs or car manufacturers is inappropriate.

    Neoliberalism as opponents see it, should really be described as corporatism / corporatocracy, since most of the complaints are really directed at the same bunch of multinationals suckling from the public teat or having undue influence as political donors / think tanks / MPs / MEPs / the EU Commission / trade negotiators or whoever. Although I am no fan of extreme free marketers, there is a massive difference between being pro-market and pro-corporate. Dan Hannan would be pro-market, George Osborne would be pro-corporate (including corporations owned by foreign states no less). The pro-marketers would suggest that if there was proper competition, universally unpopular corporations (who are blamed and often rightly for being the unacceptable face of neoliberalism) such as say G4S would have been trounced by better rivals.

  • Richard Easter 24th Jan '17 - 2:09pm

    Lorenzo Cherin “This country and this party are conservative in outlook, socialist in affection. Result confusion!”

    Indeed. I have often thought that the country is broadly liberal / conservative on economics – with the caveat of socialist solutions preferred for some key industries and services – NHS / rail / mail / utilities, and largely tolerant, but with a patriotic veneer. It is how opinion polls can show many of the individual policies of “Red” Labour and UKIP can be extremely popular, but the actual parties unpopular and unlikely to win a general election.

  • Tom Papworth 24th Jan '17 - 2:10pm

    Little Jackie Paper,

    Thank you for your comment. I think that you are right that critics of ‘neoliberalism’ are often thinking of ‘corporatism’, but I think that it is often they who conflate the term. The belief that ‘free markets’ are just a cover for big business interests is all-too-prevalent (not least among academics).

    In my defence, it’s a little hard to define what those who use ‘neoliberalism’ are complaining about when they use the term, as they so rarely define it themselves. However, I think many of the Washington Consensus proposals were genuine attepts at free market reforms and I would say they are an example of what those who use the term describe as ‘liberal policies’.

    You’re bang on with ‘working class’, btw: a meaningless term when most jobs are in the service sector and the poorest in society are not working!

  • Little Jackie Paper 24th Jan '17 - 2:15pm

    Richard Easter – I agree with you on the word corporatism.

    But what exactly is wrong with the principle per se of outsourcing crisis centres? If, say, a dedicated charity can effectively run a crisis centre at reasonable cost (and charitable activity is not necessarily not-for-profit activity) then why not, ‘outsource,’ to that charity? And, of course, hold that charity to account for both performance and finance.

    With these conceptual debates it’s easy to get hung up on words like outsourcing. Outsourced services can be effective. A distaste for corporatism should not lead one to be closed to models of delivery.

    Perhaps more controversially one could equally say that there are poorly performing parts of the NHS and that being hidebound to the NHS model does no one any favours.

  • Tom Papworth 24th Jan '17 - 2:16pm

    Lorenzo (and Richard) – much there to agree with, but I’ll limit my comments to one. Many years ago I remember my father saying “We tried socialism in Britain, once, but we didn’t really like it!”

    I think the majority of people’s instincts are of the interventionist-conservative bent that is epitomised by Bismark, often labelled “one nation” and is pragmatic to a fault. I think Theresa May marks the (re-)capture of the Conservative Party by that strand of opinion and that is exactly why the Tories are completely dominant at the moment…

    … and will, I suspect, continue to be for some time.

  • Lorenzo Cherin 24th Jan '17 - 2:30pm

    Richard Easter and Little Jackie Paper

    I was using the word conservative with a small c because it is found on the left as well as right , and thus the confusion is both understood and greater yet ! I am not left wing or right wing , I am a Liberal Democrat, open minded , but favouring not ideology but ideas. I welcome them from all who are good people and care for others. The mere suggestion or consideration that only the left or right are worth constant attention for solutions , not the centre is now the discredited place, is nonsense. The radical centre, moderate centre left at times, and moderate centre right once in a while, is where, Liberalism is. Leftwingers belong in a Socialist party , rightwingers in a Conservative party. We can welcome leftwing Liberals, but only if they stop vilifying those who are not consistently leftwing , as thus being rightwing!

    I am most certainly not rightwing. I am most definitely not small c or big C conservative. I was once upon a time in Labour , and saw the same outdated obsession with one side or another there, culminate in the hybrid of old and new Labour!

    Neoliberalism , like Orange bookers , or Cleggies, or Blairites, has become a useless , silly shorthand for , anything that is not what we like and always did who presume there was and is only one pure Liberalism and socialism !

    Bob Dylan wrote and sang that , the times they are a changing , before I was even born ! Well it took longer on language and open debate !

  • Richard Easter 24th Jan '17 - 2:35pm

    Little Jackie Paper – I think you bring up a valid point when suggesting the use of charities. Outsourcing of rape crisis centres to G4S I find utterly disgusting. Allowing an appropriate charity to be involved instead, it is a different kettle of fish.

    As for the NHS, I am not opposed to charities running certain services if it is appropriate, as long as the reason is not to do with cost cutting. If a charity has specific expertise, and has appropriately qualified and suitable staff, then I agree it should be considered. I do however have no truck with the awful outsourcing companies which have had scandal after scandal and appear to be truly awful people to work for as well.

  • Tom Papworth 24th Jan '17 - 2:37pm

    George,

    You are not alone, I am sure, in tuning out when ‘neoliberal’ is used, and your description of how it is used is all-too-accurate.

    Having said that, your suggested definition that “Neoliberalism refers to politics that thinks of most things as market-driven; tends to want to privatise everything; and discounts motivations such as altruism and vocation” is a decent and robust one.

    Even there, though, I doubt that anybody would accept the label thus defined. Even the most pro-market people I know do not deny motivations such as altruism and vocation – indeed, it is vocation that drives many of the greatest entrepreneurs. And while many do want to “privatise everything”, that is not the same as suggesting (as some imply) that they wish to commercialise everything or structure every human relationship in the manner of market exchange.

  • Tom Papworth 24th Jan '17 - 2:41pm

    Richard/Lorenzo,

    Your rape-crisis centre example is an interesting one. It highlights that “privatise” does not necessarily mean “commercialise”; charities ARE private sector organisations.

    Having said that, what should matter is the quality of the care and the devotion of the staff, not whether it is provided by the state, a charity or a commercial organisation.

  • Peter Martin 24th Jan '17 - 2:42pm

    @ George,

    “I have endlessly asked for definitions for neoliberal”

    Have you? Maybe I can oblige. How about?

    Neoliberalism refers primarily to the 20th century resurgence of 19th century ideas associated with laissez-faire economic liberalism.

    or

    The economics theory which insists that fiat currencies should be managed as if they were actually gold standard currencies.

    The first is from the first sentence of Wiki’s entry on the topic. The second would be my preference. If there’s a gold standard then there is some validity in the idea that the total money supply is an important economic parameter. Every pound in existence needs to be backed by a fixed quantity of gold.

    But if we accept the more modern notion that the pound is just an IOU of government there is only one reason why government shouldn’t create as many as they like. Inflation. Providing inflation is not above target limits, there is no reason why governments should not run budget deficits.

    If that last paragraph causes you to recoil in horror, then you have severe neo-liberal tendencies I’m afraid!

  • Little Jackie Paper 24th Jan '17 - 2:46pm

    Richard Easter – Yes. ‘Outsourcing’ is not I think the same as ‘outsourcing companies.’ The latter are the purest example of corporatism I can think of. Oddly what I would think of as a ‘neoliberal’ would probably hate the outsourcing companies!

    We should not be hidebound by conceptualisations.

    Now just to be clear there are other dangers with charities. If for example a charity is getting 95+% of its income from one or two contracts with the state then I’d have to wonder what the nature of that organisation really was and wonder where accountability really lay. Charities should not be exempt from scrutiny any more than G4S.

    It is inevitably difficult to legislate for motivations, however on a conceptual level we do, as the article rightly says, need precision. The value judgments are the politics.

  • Little Jackie Paper 24th Jan '17 - 3:06pm

    Tom Papworth – ‘You’re bang on with ‘working class’, btw: a meaningless term when most jobs are in the service sector and the poorest in society are not working!’

    Indeed. It is attractive in the internet talkboard era to see ourselves as the moral, ideological and political descendants of some wildly over-romanticised salt-of-the-earth working class. In truth if you pay a mortgage, drive a car, go on foreign holidays then you aren’t working class in the sense of my grandparents.

    What we have is an underclass, a coping class, a comfortable class and an overclass. Being in the coping class does not make one necessarily poor – if you are coping then great. But compare the instability now of the world of work compared to the low house prices and mass-employing production lines of the past.

    Indeed think of how the coping class might see the EU as a headache whilst the comfortable class see a retirement villa.

    Labour under Corbyn is trying to recreate the coalition of the metropolitan liberal and working class. He will fail precisely because that class system no longer exists in any great number. Note how his army of non-voters has so far failed to materialise.

    Worse, the constant talkboard recourse to ‘the working class’ is just acid, eating away at the ability of non-Conservatives to describe, conceptualise and speak to the world as it is now. Theresa May talked about JAMs – I didn’t think she got it quite right but she was closer than anyone else (alarm-clock Britain/squeezed middle).

  • Tom Papworth 24th Jan '17 - 3:14pm

    There are some interesting figures (somewhere – I’m too lazy to source them!) about people’s propensity to define themselves as ‘working class’. Throughout most of the 20th century the prevalence of self-defined ‘working class’ people declined, but in the 1990s (as a reaction to Thatcherism? Due to the resurgence of Labour?) it became more popular.

    The irony is, it was becoming more popular even while approaching half of school-leavers went to university, more jobs were shifting into services, and home-ownership peaked at c.70%.

  • David Evershed 24th Jan '17 - 3:25pm

    Congratulations to Tom Papworth on an excellent informative article.

    Personnally I would avoid using the word neoliberalism because it has become a pejorative term.

    I prefer using the terms social liberal and economic liberal and see the Lib Dem party as supporting both forms of liberalism.

  • Peter Martin 24th Jan '17 - 3:28pm

    Many on the left confuse Globalisation with Neoliberalism. Prof Bill Mitchell explains why they aren’t necessarily the same thing at all:

    http://bilbo.economicoutlook.net/blog/?p=33417

  • David Evershed 24th Jan '17 - 3:32pm

    Regarding the definition of working class I remember when I was 18 years old in the 1960s the criteria were to satisfy all of the following:

    a) work in a manual job
    b) grandmother lives within a quarter of a mile
    c) live in a rented house.

    I qualified as working class. Neither I nor my my children do nowadays.

  • “There are some interesting figures (somewhere – I’m too lazy to source them!) about people’s propensity to define themselves as ‘working class’.”

    There are also a lot of people that like to call themselves ‘progressives’. Most folk haven’t a clue what it actually means, but those that use it,.. usually use it as a club to beat those they see as inferior, over the head with.?

  • @LJP Now just to be clear there are other dangers with charities. … Charities should not be exempt from scrutiny any more than G4S.

    I always thought that (ie. scrutiny and accountability) was the prime purpose of CIC’s, thus I would not expect the government to outsource services to Charities, but instead outsource them to CIC’s, that may be controlled by Charities.

  • Tom Papworth 24th Jan '17 - 3:54pm

    J Dunn,

    I suspect ‘progressive’ is unhelpful for exactly the opposite reason: it is ONLY used by those who self-identify as such and is ALWAYS used positively, while again lacking any clear definition. (It had one in the early 20th century, but as we have seen, that is no guide to current usage).

  • Little Jackie Paper 24th Jan '17 - 3:55pm

    Roland – Sorry, yes. In a thread about precise language that was a slip! And as I briefly worked with a social enterprise I really should have known better. I have to admit that I don’t know the precise differences on governance or what outsourcing practice would be, I leave that to others.

    But I think the points I made stand – that outsourcing need not necessarily mean conventional outsourcing companies and that entities like charities/CICs should still be accountable as much as anyone else.

  • “The proportion of the British population that consider themselves working-class is the same as in 1983, despite long-term decline in the number of working-class people in the UK. According to an annual survey from NatCen, 60% of Brits identify themselves as working-class while the remaining 40% identify as middle-class.”
    Some 90% of Japanese have come to regard themselves as middle class.

  • Tom Papworth 24th Jan '17 - 4:07pm

    Thank you for that Manfarang. Do you have a link to the source.

  • Well, neoliberalism basically means to be in favour of free markets, low taxes, and free trade. ‘Neoliberalism’ is a term that derives from that, as it was a revival of the liberal economics of the 19th century. So, the difference between it and classical liberalism is little, if any, maybe that classical liberalism focused more on opposing monopolies.
    So neoliberalism, based on what really happened, can be called corporatism. Thus, both of them were different from New Liberalism, which promotes active intervention to improve living conditions and correct market failures. But, in various sectors like electricity and pharma, monopolistic or oligopolistic structures are more efficient due to the advantage of economies of scale.

    But one thing I can observe from what really happened is that neoliberal policies allow great freedom for foreign takeovers, even if the objects are vital national assets like electricity grids, gas or water supply. I do not really know how modern Liberalism’s view of foreign takeovers. Also, I found that they were free trade zealot, based on the way UK government opposed EU anti-dumping tariffs on Chinese steel. One thing I know that unlimited free trade had directly contributed to British economic decline long ago.

  • Peter Martin 24th Jan '17 - 4:46pm

    @George,

    I don’t believe the definitions are at all inconsistent. The word Liberalism can mean different things to different people. It means different things to Americans, where it (or liberalism) implies a left political stance, to the older English meaning. The Liberalism of Gladstone is quite different to the Liberal Democracy of Tim Farron.

    Gladstone was quite right to worry about the money supply. Because in his time a Gold Standard was in force. But, it wasn’t correct for Nick Clegg to have the same concerns. He was buying into the neo-liberal narrative during his time in coalition.

  • I don’t like attempts to define other people’s class identity or political identity. I think the message is that we should try and use words that are not only used positively or negatively.

  • Tom Papworth 24th Jan '17 - 5:57pm

    The attempt by the Adam Smith Institute to present the pro-neoliberal case is interesting, but suspect it will be more effective in promoting the ASI (as the go-to voice everytime somebody rages about neoliberalism!) than actually helping bring meaning to the term.

    Not, anyway, unless they start contributing to academic journals.

  • Tom Papworth 24th Jan '17 - 6:04pm

    Thomas,

    Thank you for offering a definition, which puts you head-and-shoulders above most of the academics reviewed by Boas Gans-Morse!

    I would question whether defining “neoliberalism [as] to be in favour of free markets, low taxes, and free trade” is narrow enough. That would apply to a lot of mainstream politics. Even Liberal Democrat policy is largely pro-trade and is generally in favour of markets, with qualifications; on low taxes the party is not consistent. Of course, you might counter that a lot of mainstream politics is ‘neoliberal’ in which case I would have to concede that your definition is robust (even if I don’t agree with it).

    I think a problem remains that people who themselves favour of free markets, low taxes, and free trade (myself included) do not accept the term (I certainly don’t!). This means that the term is ONLY used pejoratively, meaning that even if it is defined (as you have done) nobody is really willing to challenge that definition. As such, the word fails to fulfill the role that other terms (e.g. liberal; just; fair; democracy) fulfill, which is to expand our understanding of the world through our debate about the boundaries of meaning.

    I would highly recommend Gaille’s article (cited above) on essentially contested concepts, which is extremely influential in the social sciences and explains this issue far better than I can.

  • Peter Watson 24th Jan '17 - 6:09pm

    Interestingly, the author of that Adam Smith Insititute piece (Sam Bowman) is a former winner of this site’s Liberal Voice of the Year (https://www.libdemvoice.org/and-the-winner-of-our-liberal-voice-of-the-year-award-is-sam-bowman-32632.html – with some familiar names below the line!). He is possibly the reigning LibDemVoice Liberal Voice as I don’t recall a more recent one.

  • I think just a convenient term to describe the small state, market forces will cure all, let them eat diversity leftish version of the End of History triumphalism that gripped politics in the 1990s. The point at which the Left sopped arguing on behalf of their voters and started to using pseudo marketing language about clients and messaging, Socially liberal and fiscally right wing. Nice language and lots of high profile charity-like donations to “good causes”.

  • Peter Martin 24th Jan '17 - 6:34pm

    @Thomas,

    “Well, neoliberalism basically means to be in favour of free markets, low taxes, and free trade.”

    It is quite possible for government to be in favour of the three things you mention; running its economic policies to that effect, but run a large budget deficit and a large trade deficit too. Would it still be neoliberal if unemployment was very low too?

    You’d say yes, but I’d disagree!

  • @ Peter Martin
    Well, for trade balance, countries with trade surpluses tended to be mercantilist rather than being free trade worshippers, e.g. Germany.

    For gov budget, well, this is no longer a gold standard era. But it shares the similarities in low taxes and low public expenditure with Gladstonian Liberalism, and the latter was even more serious in this. Note that large scale public works under Gladstonian era, and even under Asquith government were little to none.

  • Nom de Plume 24th Jan '17 - 6:56pm

    I share Peter Martin’s concerns about budget and trade deficits. There are countries that do these things well. The UK is not one of them. I wonder where it will all end.

  • I don’t know, but as I read since 1920s, British Liberalism was no longer laissez faire, pro free market. When your plan involve railway and coal royalty nationalisation, as well as state-funded infrastructure programs and state-backed investment bank (or National Investment Board), it is no longer laissez faire or pro free market, it is bold interventionist. Well, it was so until the Orange Book as I know.

  • Peter Martin 24th Jan '17 - 7:32pm

    @Thomas,

    You are quite right about mercantilism and free trade. So the big surplus countries like Germany and China can’t be pro-free trade. This means that the countries which are for free trade, just the UK and the USA essentially, end up running large trade deficits. Someone has to run a deficit for someone else to run a surplus.

    The consequence of a trade deficit is a budget deficit too. Money net flows out of the eeconomy to pay for imports which has to be replenished by a government deficit to keep the economy moving.

    So we can’t have everything we want. If we want free trade we have to accept the deficits that go with it.

  • @ Thomas……

    “Note that large scale public works under Gladstonian era, and even under Asquith government were little to none”……. Sorry, if we’re talking public expenditure on state assets, to an extent must disagree.

    I think you’ll find British Naval expenditure pre-1914 under Asquith was the equivalent of about £ 6 billion per annum in today’s prices. Dreadnoughts cost over £ 1 million each. British Naval expenditure in 1914 was twice that of Germany – the dreadnought was owned by the state.

    Always enjoyed the Lloyd George quip at Limehouse in his defence of the budget : “A fully equipped Duke costs as much to keep up as two dreadnoughts, and Dukes are just as great a terror, and they last longer.” – and LLG certainly took Keynsian economics on board in the 1929 Yellow Book.

    And don’t forget the role of ‘municipal socialism’ administered by Liberal Local Councils : Town Halls, Tramways, Baths, Public Parks, Water, gas, electricity etc., in Victorian and Edwardian Britain. One of my major criticisms of Tory Governments is that they killed off local government post Thatcher.

  • Nom de Plume 24th Jan '17 - 8:17pm

    @ Peter Martin

    I don’t understand your argument. The mercantilism argument might be directed against China, but Germany is part of the single market with its rules, here it is a matter of relative competativeness. I hope you are not trying to recommend protectionist policies. No trade wars thank you. I do not see how this could be in Britain’s interests. The Brexit Government appears to be very keen on free trade. Whaterever the precise meaning of that term might be. Nevertheless, the long term effects of a trade deficit have yet to be clarified. I am not an expert. Perhaps I should read books about the 1920s and 30s.

    The government’s structural, budget deficit is separate from the trade deficit. With the trade deficit money flows out the country and flows back when the foreign countries buy government bonds. The long term effects of this are also not clear to me.

  • Peter Martin 24th Jan '17 - 8:56pm

    @Nom de Plume,

    I agree that protectionist policies are undesirable. However, Germany has been protectionist since WW2. It deliberately kept its currency, the DM when it used it, cheaper than the market would have valued it. That’s not difficult to do. The German Govt simply instructed the (supposedly independent) Bundesbank to sell DM to whoever wanted to buy at a certain rate. Now it uses the weakness of the euro, relative the the strength of its own economy to the same effect. If Germany had its own currency it would strengthen considerably. No doubt to the dismay of its domestic exporters.

    Every country running a large surplus deliberately manipulates its own currency downwards by one means or another. Can you think of any exceptions?

    Yes the Governments deficit is separate from the trade deficit but they are related. If we divide up the pound sterling economy into the UK Government and everyone else who uses sterling it must follow that

    Government Deficit = Everyone Else’s Surplus

    If we then divide everyone else into Domestic and Overseas

    Government Deficit = Domestic Surplus + Overseas Surplus

    The surplus of our overseas partners is the same thing as our trade or current account deficit. The Domestic Surplus is the same as our net savings.

    So Govt Deficit = Net Savings of Private Sector + Trade Deficit

  • Nom de Plume 24th Jan '17 - 9:14pm

    @ Peter Martin

    Thanks for the reply. Germany is a beneficiary of a weak euro. The euro has many problems. I will not contest the second part of your argument. A bit too technical. Still, it would seem that some sort of correction is necessary. I keep thinking of Greece.

  • Peter Martin 24th Jan '17 - 9:40pm

    @Nom de Plume,

    Are the German people really the beneficiaries? They are supplying the ROW with more Goods and Services than they receive in return. So their standard of living is less than it could be.

    If they balanced their trade they would be better off. They’d not be sucking euros out of the economies of their EU trading partners and the partners would benefit too. Ideally they should go further and make themselves even better off by running a deficit. That would mean euros would flow out of Germany and stimulate the depressed EZ. It’s a win-win situation.

    I’ve tried to explain this to my German friends, but all they do is smile just to let me know they understand what I’m saying. They can’t agree though. I think it’s just part of the German psyche that any kind of deficit, except in what really matters, is a bad thing!

  • Nom de Plume 24th Jan '17 - 10:01pm

    @ Peter Martin

    In light of the Greek experience, I think it is unlikely Germany will run a budget deficit. Remember the Growth and Stabililty Pact? There might not be anything they want to buy from the rest of the EU. I agree that there is a cultural aspect to it. Germany lives from its exports. Perhaps Germany should have it own currency. The structural problems of the euro are well known. For reference GNI(2013) per capita in dollars: Germany 45,620; US 53,750; UK 38,160. They already are quite rich.

  • This has been quite an interesting conversation, so thanks.

    @Nom de Plume and Peter Martin
    The following may be of interest to you as it seems to cover the topics you’re talking about (Mark Blyth is a professor at Brown Uni).

  • Trade deficit is not necessarily associated with budget deficit. Ireland before 2008 actually had budget surplus.

    @ David Raw
    From what I read, the municipal administered electrification approach was a failure. This led to the fact that each municipal built a small-to-medium power station with different standards, which were extremely inefficient. Actually this was the worst approach ever. Britain did not have a decent electricity supply before 1926. I think I could blame Liberal economic policies of laissez faire and free trade for British industrial decline.

    You are right about LG. While Asquith was a traditional laissez-faire Liberal, LG represented the Radical wing, who promoted active intervention. LG actually introduced Keynesian policy as early as 1924 with his Coal and Power Report. Thats why I prefer LG over Asquith. The latter was too lazy and passive, and always chose to wait and see, which made him a failed war leader.

    @ Peter Martin
    German approach, however, is good for its industries as a whole, and thus protect workers from job losses caused by foreign imports outcompeting domestic producers. You do know that Liberal policy of free trade (and laissez faire) was a major cause of British industrial decline. The biggest evidence was the case of synthetic dye and footwear (during late 1890s, American shoes nearly destroyed British domestic firms). Chamberlain and the Tories actually had a good point when he called for Tariff Reform to protect domestic businesses.

  • @ Little Jackie Paper

    I do not think that neoliberalism means a support for “corporatism”. I am not sure anyone thinks that large corporations always provide the best method of supplying goods and services.

    @ Tom Papworth

    I think we should look at both Thomas’ and the Adam Smith Institute’s definitions as our starting position for a definition of neoliberalism. The Adam Smith Institute points out that neoliberalism is different from Libertarianism. Libertarianism is the belief that government should be small and do very little. They say that neoliberalism is different because it includes a role for government but “built on market-based lines”.

    Therefore neoliberalism is more than “be(ing) in favour of free markets, low taxes, and free trade”. How about, a brief that the best method of providing most goods and services for the economy and society is via the market with few restrictions (including free trade), low taxes and that government should balance their budget and have a low level of national debt (which would include some of the points made by Peter Martin)? It would also include a brief that laissez-faire economics are always good for society.

  • Peter Martin 25th Jan '17 - 11:40am

    @ Thomas,

    “Trade deficit is not necessarily associated with budget deficit. Ireland before 2008 actually had budget surplus.”

    It is possible for a country to have a trade deficit without a govt budget deficit. But someone in the country has to do the borrowing to support the trade deficit. If it isn’t government borrowing, it has to be the private sector borrowing (usually to excess). That was Ireland, Greece and many other countries too, prior to 2008.

    Of course when the borrowing stops, as it has to, then everything abruptly changes and we have a 2008 type crash. The economics profession should have sounded louder warnings. Fisher developed his theory of Debt Deflation in the early ’30s so the crash was entirely predictable.

  • Good article. One of the bothersome things about being an active politician interested in political theory is that the academics think they can do a Humpty Dumpty and define words how they like. A consensus can arise among “political scientists” about what Neoliberalism or Liberalism means without their description of Liberalism (for example) bearing any resemblance to what people who call themselves Liberals think, argue and do. This is unscientific. You wouldn’t expect zoologists to promote theories about animal behaviour divorced from what the animals did.

    As someone whose academic training was in History not Politics, I approach the word “Neoliberalism” asking precisely what historical Liberalism it’s reviving and adapting.

  • Tom – Like Geoffrey Payne, I think you protest too much.

    As you say, the term ‘neoliberalism’ was devised in the 1930s for a school of liberal thinking that was close to todays ‘Social Liberal’ but very distinct from the older classical/laissez-faire liberalism. It was a necessary response to the immense social and technological changes of the preceding decades.

    But … words change their meaning especially when they are largely abandoned by their originators. In the sciences it’s important to carefully define key words and concepts but politics is largely about propaganda so what do you expect would happen to an abandoned word? And why would anyone expect propagandists to carefully document their definitions and logic?

    In the 1980s it made perfect sense to call the Thatcher government’s new political approach ‘Thatcherism’ but as it spread around the world and then she herself left the stage that became increasingly inappropriate. A new word was needed and so from the late 1980s/early 1090s the at-the-time almost unused ‘neoliberalism’ was pressed into service.

    And it’s not unreasonable. After all, Thatcher and many Conservatives (and some UKIPpers come to that) self-describe as ‘economic liberals’. They meant a variety of liberalism that is close to laissez-faire and hasn’t adequately taken account of the consequences for political economy of changing technology and society.

    As for definitions of ‘neoliberal’, then for what it’s worth, Wikipedia can help as Peter Martin points out. Another, from Prof David Harvey’s book A Brief History of Neoliberalism, is one I’ve previously quoted on LDV. Harvey suggests, “a theory of political economic practices that proposes that human well-being can best be advanced by liberating individual entrepreneurial freedoms and skills within an institutional framework characterised by strong private property rights, free markets and free trade. … if markets do not exist … then they must be created by state action if necessary. … State intervention in markets (once created) must be kept to a bare minimum …”

    In effect, it’s market fundamentalism, markets uber alles.

  • Sue Sutherland 25th Jan '17 - 3:33pm

    This discussion has brought back the days when I was a Sociology student in the 60s and many discussions were interrupted by the cry of ” define x!” Whilst this may be a necessary part of academic debate I’m not sure that politics benefits from such an approach, indeed I’m afraid that this attitude of mind has led us inexorably to Brexit and Trumpery. It leads us down the paths of intellectualism and removes politicians from the rest of the population, indeed sometimes I think this type of jargon is designed to impress others with our superior understanding and keep them apart from us, to define us as the ones who know best. In other words, as experts. Like neoliberalism this is becoming a term of abuse and we can’t understand why when we remain within the alluring bubble of the chattering classes. Move outside the hallowed walls and it becomes obvious that truth itself is only what the last expert told us, until s/he is overcome by another expert or by events. Knowledge has become almost as vast as the universe and impenetrable to those who do not have detailed knowledge of their subject and even people with expertise can lead themselves up the garden path towards the 2008 crash.
    So let’s all have an enjoyable debate about terms but don’t let’s delude ourselves that this is what our party needs to put our failed society right.

  • Neoliberalism seems to be particularly difficult for many liberals. I think that’s because it uses the same words and similar concepts but assembled in a subtly but crucially different way. The word itself sounds like a sort of liberalism but the concept is, I submit, profoundly illiberal.

    The best analogy is cancer. That is so dangerous, so difficult to cure because it starts when a cell experiences a critical mutation in some part of the complex molecular machinery that regulates it and keeps it serving its proper purpose in the body yet the body recognises it as ‘self’ and so doesn’t mobilise the immune system to destroy it.

    If that mutation enables it to multiply without limit, cancer results and it starts consuming too much resource while contributing nothing back.

    That’s what neoliberalism does. From David Harvey’s definition it’s about marketising everything (even when it makes no sense) and deregulating it – very recognisable Tory policies of recent decades. More subtly, even such apparently simple statements as ‘private property’ and ‘free trade’ beg all sorts of questions about whose definitions are used and whose freedom is paramount.

    In Adam Smith’s day the first canals were being dug and railways were several decades in the future. So, almost all production was artisanal and local and used with a few miles. That meant that landowning dominated rentier (i.e. Tory) thinking. Now with a industrial economy there are many more ways to suck economic rent out of the system. Naturally, no proper Tory would pass up that opportunity for rent!

    But … to make that politically feasible you have to convince everyone that markets lead to optimal outcomes (they don’t but that’s another story) and therefore must not under any circumstances be interfered with – while surreptitiously setting the rules to benefit yourself and your cronies.

    That’s why neoliberalism is like cancer. It looks and sounds so like the real thing to most liberals that their immune system doesn’t recognise it as dangerous and they even encourages it while protesting the inevitable social problems – the result of so much wealth being syphoned off by a well-connected few that the majority are starved.

  • Gordon – Free trade, private property right and laissez faire, i.e. let the markets determine – clearly originated from Classical Liberalism. But I am not sure about deregulation, which emerged during the 1980s. I don’t know whether Classical Liberalism’s view of regulations was the same or not. However, the biggest problem was that during 19th century, monopolies were very rare and limited. Social or Progressive Liberals, of course, prefer strong regulations and state intervention both for protecting people and for National Development.

    The Tories were traditionally protectionist at heart, but since Thatcher they also adopted Free Trade policy, well, even to a scale at which they vetoed EU anti-dumping tariffs on Chinese steel (madness).

    But one thing I am sure is that laissez faire was outdated, and in Britain it had outlived its usefulness for too long. Now, every country must have an industrial strategy, with public-private cooperation in R&D, training, infrastructures… In the US, various commercialised inventions and developments were originated from the military and public agencies like NASA.

  • Antony Watts 29th Jan '17 - 11:49pm

    I offer you a definition of neo-liberalism:
    1 Neo-liberalism defines human relations as competition, people as consumers
    2 We express our democratic choices by buying and selling
    3 We get rewarded by merit and punished by inefficiency
    4 No limits to competition, minimise tax & regulation
    5 Privatise public services
    6 Inequality is virtuous, reward comes from trickle down
    7 The market ensures everyone gets what they deserve
    8 If you don’t have a job, you are unenterprising
    9 If you can’t buy a house, have maxed out your credit card, have fat kids, then you’re feckless and improvident
    10 It welcomes globalisation and capital freedom that powers multinationals to move jobs overseas, and/or buy our own assets.

    That’s pretty much what I don’t like about the whole thing.

  • Kelly McLellan 22nd Apr '17 - 4:53pm

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